Cheap Thar Coal to End Load Shedding in Pakistan

Coal is the cheapest and the most common fuel used directly or indirectly to produce electricity and heat in the world today. Global coal consumption was about 6.7 billion tons in 2006 and is expected to increase 48% to 9.98 billion tons by 2030, according to the US Energy Information Administration (EIA). China produced 2.38 billion tons in 2006. India produced about 447.3 million tons and Pakistan mined only about 8 million tons in 2006. 68.7% of China's electricity comes from coal. The United States consumes about 14% of the world total, using 90% of it for generation of electricity. The U.S. coal-fired plants have over 300 GW of capacity.

The Thar desert region in Pakistan is endowed with one of the largest coal reserves in the world. Discovered in early 1990s, the Thar coal has not yet been developed to produce usable energy. With the devastating increases in imported oil bill and the growing shortages of gas and electricity in the country, the coal development is finally beginning to get the attention it deserves. Coal contributes about 20% of the worldwide greenhouse gas emissions but it is the cheapest fuel available, according to Pew Center on Global Climate Change. It can provide usable energy at a cost of between $1 and $2 per MMBtu compared to $6 to $12 per MMBtu for oil and natural gas, and coal prices are relatively stable. Coal is inherently higher-polluting and more carbon-intensive than other energy alternatives. However, coal is so inexpensive that one can spend quite a bit on pollution control and still maintain coal’s competitive position.

At the end of the decade of 1990s when the economy was stagnant, Pakistan had about 1200 MW excess capacity. Between 2000 and 2008, the electricity demand from industries and consumers grew dramatically with the rapid economic expansion that more than doubled the nation's GDP from $60 billion to $170 billion. The Musharraf government added about 3500 MW of capacity during this period which still left a gap of over 1500 MW by 2008. The economy has since slowed to a crawl, the electricity demand has decreased, and yet the nation is suffering the worst ever power outages in the history of Pakistan. As discussed in an earlier post, Pakistan's current installed capacity is around 18,0000 MW, of which around 20% is hydroelectric. Much of the rest is thermal, fueled primarily by gas and oil. Pakistan Electric Power Company PEPCO blames independent power producers (IPPs) for the electricity crisis, as they have only been able to give PEPCO much less than the 5,800 MW of confirmed capacity. Most of the power plants in the country are operating well below installed capacity because the operators are not being paid enough to buy fuel. Circular debt owed to the power producers and oil companies is currently believed to be largely responsible for severe load shedding affecting most of the nation.

The circular debt has assumed alarming portions since 2008, resulting in the current severe power problems. Former finance minister Saukat Tarin recently told the News that “in real terms the circular debt has swelled to Rs108 billion which mainly includes non-payment of Rs42 billion by KESC, Rs21 billion by the government of Sindh and Rs15-16 billion from commercial consumers to the Pakistan Electric Power Company (Pepco)". Just prior to leaving office, Tarin decided to raise Rs. 25 billion as a small step toward settling the swelling unpaid bills owed to power producers.

Per capita energy consumption in Pakistan is estimated at 14.2 million Btu, which is much higher than Bangladesh's 5 million BTUs per capita but slightly less than India's 15.9 million BTU per capita energy consumption. South Asia's per capita energy consumption is only a fraction of other industrializing economies in Asia region such as China (56.2 million BTU), Thailand (58 million BTU) and Malaysia (104 million BTU), according to the US Dept of Energy 2006 report. To put it in perspective, the world average per capita energy use is about 65 million BTUs and the average American consumes 352 million BTUs. With 40% of the Pakistani households that have yet to receive electricity, and only 18% of the households that have access to pipeline gas, the energy sector is expected to play a critical role in economic and social development. With this growth comes higher energy consumption and stronger pressures on the country’s energy resources. At present, natural gas and oil supply the bulk (80 percent) of Pakistan’s energy needs. However, the consumption of those energy sources vastly exceeds the supply. For instance, Pakistan currently produces only 18.3 percent of the oil it consumes, fostering a dependency on imports that places considerable strain on the country’s financial position. On the other hand, hydro and coal are perhaps underutilized today, as Pakistan has ample potential supplies of both.

The country's creaky and outdated electricity infrastructure loses over 30 percent, some of it due to rampant power theft, of generated power in transit, more than seven times the losses of a well-run system, according to the Asian Development Bank and the World Bank; and a lack of spare high-voltage grid capacity limits the transmission of power from hydroelectric plants in the north to make up for shortfalls in the south.

It does seem that Pakistan is finally getting serious about utilizing its vast coal resources to produce electricity and gas. Talking recently with GeoTV's Hamid Mir, Pepco Managing Director Tahir Basharat Cheema shared the following list of coal projects being launched:

1. The Sind Government has awarded a 1200 MW project to extract Thar coal and produce electricity to Engro Power.

2. A similar 1200 MW project is being undertaken by Pepco in Thar. The Pepco project also includes a 700 Km transmission line to connect Thar plants with the national grid.

3. An experimental project for underground coal gasification is being built by Pakistani nuclear scientist Dr. Mubarakmand to tap underground coal to produce 50 MW.

The coal and various renewable energy projects are expected to be online in the next 2 to 5 years. If these projects do succeed and more investors are attracted to the power sector, then Pakistan has the potential to produce about 100,000 MW a year for a century or longer. But these efforts will not help in the short or immediate term. What is urgently needed is decisive action to resolve the circular debt problems and restore power generation to full installed capacity immediately.

Here is a video clip of former president General Musharraf talking about the worst ever load shedding being faced by Pakistanis today:

Pakistan has glimpsed its energy future, and it is brown – coal, to be exact.

Sindh Engro Coal Mining Co. is developing the $3 billion Thar Coal mining project in partnership with the government of Sindh. The Thar project is expected to produce 100 megawatts of electricity by 2016 using Underground Coal Gasification (UCG) technology. The Thar UCG pilot project is situated in the Tharparkar desert in Sindh eastern Pakistan.

UCG converts coal to gas while still in the coal seam, where injection wells are drilled and used to supply the oxidants to ignite and fuel the underground combustion process, with separate production wells bringing the resultant gas to the surface. The high pressure combustion is conducted at temperatures of 1,290–1,650 degrees Fahrenheit, but can reach up to 2,730 degrees Fahrenheit. The process produces carbon monoxide and dioxide, hydrogen and methane.

The project is being driven by Pakistan’s dire electricity situation. With about 50 percent less electricity generation capability than the actual demand, Pakistan’s National Grid currently faces more than a 5,000-megawatt shortfall in power generation, leading to blackouts in both urban and rural areas of the country. Due to unscheduled shortages by the National Power Control Center, urban areas are now subjected to unscheduled minimum 8-hour power blackouts each day, while in some parts of the country, blackouts can last up to 22 hours.

So, where will the $3 billion financing come from? According to Sindh Engro Coal Mining Co. CEO Shamsuddin A. Shaikh, “The bulk of financing will be arranged from China - we may also seek funds from other places if need be.”

Interestingly, the Thar project may also improve relations with India. When asked about Thar's geographical proximity to India and the possibility of Indian participation in Thar Shaikh replied, “Yes, that's something we have in mind. India is supposed to develop an additional 100,000 megawatts based on coal in the next five years. India currently generates more than 50 percent of their electricity from coal, using about 450 million tons of coal every year. Most of that is indigenous and about 50 million tons is imported coal. They will need to import coal, we can utilize the railway line, which will be serving our own plants as well, to export coal to India. We can also put up a power plant at the mine mouth and export electricity to India. The economics are very much there, but India-Pakistan relations are always more delicate than just the economics. A plus point of working with Indians is that they have immense knowledge and experience of coal. They have been dealing with over 400 million tons of coal per annum for a number of years. It makes more sense for us to use their expertise instead of having experts from China or anywhere else.”..

Here's Power Engineering report on Japanese investment in Pak coal power transmission project:

ISLAMABAD, Nov. 3 -- Japan has offered to support Thar Coal power projects and construct transmission line to inter link the project with national grid.

Japanese Ambassador to Pakistan, Hiroshi OE stated this during a meeting with the Federal Minister for Water and Power, Ch. Ahmed Mukhtar here on Thursday.

During the meeting, the Ambassador discussed various matters of mutual interest, energy situation and current political situation.

The Ambassador expressed his views on investment opportunities in Pakistan and observed that the investment environment is better here in Pakistan so that Japanese companies are interested to put their capital in Pakistan in various projects. He also offered to invest in the Mangla Dam power extension project. He assured that Japan would continue its financial and technical support for social sector development. The Ambassador also appreciated the current recovery drive of the Ministry of Water and Power and said that it would help to increase the cash flow for power generation.

The Minister while welcoming the envoy appreciated the Japanese offers and said that the government is taking all possible measures for generation of cheap electricity. He said that the indigenous resources are being utilized for future projects to generate affordable energy. He said that a wind power project would start generation next couple of month while the other wind projects would be completed next year. Mr. Mukhtar also asked the Ambassador to invest in the wind, solar and other hydel power projects.

..Since Pakistan came into being, people have been facing loadshedding due to shortage of power supply, with frequent outages affecting economy in many ways.

Uncountable working hours have been lost, leading to an increase in poverty and economic loss of billions of rupees to the country. Surprisingly, it is happening despite the fact that only about 60% of the population has access to electricity. According to the World Energy Statistics 2011, published by the International Energy Agency (IEA), Pakistan’s per capita electricity consumption is one-sixth of the world average.

World average per capita electricity consumption is 2,730 kilowatt hours (kwh) compared to Pakistan’s per capita electricity consumption of 451 kwh.

According to the Pakistan Energy Year Book 2011, the country’s installed power generation capacity is 22,477 megawatts and demand is approximately the same. The country needs to redesign the electricity portfolio and substitute oil and gas with an abundantly available indigenous fuel source. It must develop indigenous energy resources to meet future electricity needs and can overcome energy crisis by utilising untapped coal reserves.

Fortunately, Pakistan has a very inexpensive source to get energy through coal. Coal is economically viable and a long-term solution to balance the demand and supply chain of electricity in the country, which has the fifth largest coal deposits in the world.

According to last estimates made in 2011, coal deposits in the country are up to 185 billion tons. The largest deposits are in Thar desert, which is about 850 trillion cubic feet spanning over 10,000 square kilometers, surprisingly more than the oil reserves in Saudi Arabia having a collective quantity of approximately 375 billion barrels.

At present, 40.6% of world’s electricity is being generated from coal and it is the single largest contributor to world electricity generation. By looking at the electricity generation mix of the countries that are blessed with coal, it is evident that coal is the largest contributor.

However, coal reserves of only Thar can generate 20,000MW of electricity for the next 40 years without loadshedding and at a rate Rs4 less than the current cost of electricity production. The government has given the task to experts to enhance energy efficiency by focusing on coal and ensure large scale power generation through this resource.

--

At the International Coal Conference 2011, Pakistan had invited investors from around the world, encouraging them to pour money into coal power projects as the country initially requires $1.2 billion to build power generation infrastructure in Thar. Japan is keen to finance transmission lines from the Thar coalfield to the national grid and Chinese companies have expressed interest in developing coal-based power plants in Thar and Badin.

Engro Corporation President and CEO Muhammad Aliuddin Ansari has stated that the Asian Development Bank (ADB) does not object to financing the switchover of thermal power plants to Thar coal.

“The directors of ADB have met me and the chief minister of Sindh and said that they had no objection to the conversion of power plants to Thar coal and are ready to finance [such projects],” he told The Express Tribune.

The revelation comes on the heels of the Ministry of Water and Power’s claim that the ADB is not ready to finance the conversion of power plants to Thar coal, and that the lending authority would finance power plants that run only on imported coal.

Ansari also said he is ready to travel to Manila along with a delegation from the water and power ministry to meet ADB officials and negotiate a financing deal for such projects.

Ansari recalled that it had been decided in a special board meeting of the Thar Coal Energy Board (TCEB) on October 3, 2012, chaired by the prime minister of Pakistan, that existing oil-based power plants should be modified and redesigned to Thar coal specifications, and that new coal-based plants should also be designed keeping the same specifications in mind.

It was also decided in the meeting that agreements would be signed between power generation companies and the Sindh Engro Coal Mining Company (SECMC) for the supply of coal for an existing 420 megawatt (MW) power plant in Jamshoro, as well as a new 600MW power plant to be built in the same location. These agreements were to be finalised and signed within a week, but never materialised.

Ansari said that Pakistan was facing a circular debt issue due to the poor energy mix employed by generation companies, and that conversion of power plants to run on Thar coal could address this issue. He claimed that Thar held the future of Pakistan, and reiterated that all future power plants should be designed on Thar coal specifications.

“Not only has the fuel mix shifted from gas to furnace oil, the price of furnace oil has increased four times in the last five years. This has increased the furnace oil bill by 461%, whereas power generation through furnace oil has increased by only 79%,” said a handout provided by Engro Corp as part of the interview.

Ansari said that Indonesia and India both held coal reserves that were similar in specification to the coal available in Thar. He remarked that India is expected to become a major market for coal by 2016: it already imports significant quantities to meet its needs....

Giving in to the pressure from an international lender, the government has reversed its decision on consuming domestic coal for power generation as the Council of Common Interests has approved using a blend of imported and Thar coal in power plants.

The move will pave the way for an early sanction of a $900 million loan by the Asian Development Bank that will go for the construction of a 600-megawatt coal-fired power plant at Jamshoro and for switching an existing 600MW power plant to coal.

According to sources in the finance ministry, further discussions on the $900 million loan will be held with ADB Director General of Central and West Asia Department Klaus Gerhaeusser, who was due to arrive on Wednesday.

During his two-day visit, Gerhaeusser will meet Finance Minister Dr Abdul Hafeez Shaikh and Water and Power Minister Ahmad Mukhtar. He will also hold meetings to review communication projects.

Prime Minister Raja Pervez Ashraf had placed a ban on imported coal-powered plants in a bid to encourage consumption of Thar coal in such projects. However, the ADB resisted the move and refused to extend loans for Thar coal-based power plants.

The bank was of the view that higher dependence on lignite would increase pollution, which was against the environmental policy of the lending agency.

Following the ADB’s decision, the federal government placed the case in a meeting of the CCI – a constitutional body headed by the prime minister with all chief ministers as members – on January 23. According to official documents, the CCI decided that “instead of using only Thar coal, a blend of imported and Thar coal will be used in the 600MW Jamshoro plant.”

In this meeting, Sindh Chief Minister Syed Qaim Ali Shah, who actively promotes mining and consumption of Thar coal, was also present.

CCI also decided that the Ministry of Water and Power would work out further details in deliberations with representatives of the ADB.

Apart from the ADB, the Japan International Cooperation Agency (JICA) has also expressed interest in constructing power plants in Pakistan, besides laying a power transmission lines from Thar to Matiari.

In the past many years, heavy reliance on furnace oil has disturbed the country’s energy mix. Against a one-third share of thermal power generation earlier, the ratio has increased to three-fourths. The recent emphasis on the shift to coal is aimed at tackling the runaway circular debt that has plagued the entire energy chain, forcing the government to spend billions of rupees every month to prop up the energy system.

According to a government official, it was not yet clear whether Pakistan will again take up the issue of financing the Diamer Basha Dam with the ADB director general.

However, he said these days the dam, costing $11.3 billion, was not the top priority of the government, which has shifted funds meant for the dam to another project, the Neelum Jhelum hydropower plant. An amount of Rs1 billion has also been diverted to the PM’s discretionary funds.

Here's a Dawn report on KESC's plans to invest $500 million in Karachi power infrastructure:

KESC would invest about $500 million for setting up of coal-based power plants, improvement in transmission and distribution systems in Karachi during the next five years, said Tabish Gohar, chairman, KESC board of directors here on Thursday.

A five-member KESC delegation briefed the Minister for Water and Power, Chaudhry Ahmad Mukhtar, on plans to improve power supply situation in Karachi.

Mr Gohar said that the Bin Qasim power plant would be converted on imported and local coal to generate 400MW cheaper electricity with an investment of $300 million.

The conversion plan would take almost 20 months to complete.

The KESC would spend $80 million on conversion of gas-based plants on combined cycle, while $80 million would be spent on smart grid station that would help improvement and transmission system.

The KESC chairman said that due to investment plan, the power system in Karachi would improve, and power thefts and line losses would be checked.

He also briefed the minister on outsourcing of some of its feeders and future plans to meet the electricity requirements.

KARACHI - The Sindh Engro Coal Mining Company (SECMC) and Government of Sindh broke ground on Thursday to mark the beginning of coal extraction project at Thar Coal block II. Sindh Chief Minister Qaim Ali Shah attended the groundbreaking ceremony, along with the other government officials and Senior Management of Engro Corporation, says a statement issued by Engro Corporation. Sindh Engro Coal Mining Company is a joint venture between Engro Corporation and Government of Sindh. The SECMC has completed the feasibility study on Thar Coal project, confirming the technical, commercial and environmental viability of the project.
All the required government approvals have been obtained and the Economic Co-ordination Committee (ECC) has approved $700 million sovereign guarantee for the project. The mining project, which will cost US$ 1.3 billion, is likely to start later this year and is expected to take less than four years for completion. Speaking the occasion, Ali Ansari - President and CEO Engro Corporation said, “For over four decades Engro has been a part of Pakistan’s economic landscape sharing the various challenges and triumphs that the country has offered.
As a good corporate citizen, our investments in Thar Coal project today are a preliminary step towards building the capacity, which will foster a more developed and energy-efficient Pakistan. Investments in Thar Coal are not only the need of the hour but also make sound economic sense.” On the occasion, Shamsuddin A. Shaikh - CEO Sindh Engro Coal Mining Company said, “Thar has an enormous energy potential. SECMC’s Thar Block-2 can produce 4000 MW for next 50 years. Total foreign exchange savings for 4000 MW of Thar coal based power plants are estimated at more than US$ 50 billion for life of the project.
The strategic investment and development of the Thar Coal Block II will not only help alleviate the chronic energy crisis of the country but also usher in a new era of prosperity for the people of Sindh and ultimately the people of Pakistan.
The project will yield 4,000 new direct and indirect job opportunities for the local community. The SECMC applauds the support and efforts of the Sindh Government and reiterates its firm commitment to fulfil all its obligations in a timely manner, which will bring energy security to Pakistan and accelerate the industrial development in the country.
The Engro Corporation Limited is one of Pakistan’s largest conglomerates with businesses ranging from fertilizers to power generation. Currently Engro Corporation’s portfolio consists of seven businesses, which include chemical fertilizers, PVC resin, a bulk liquid chemical terminal, foods, power generation and commodity trade.

The current acute energy crisis in Pakistan, certainly the worst of all times is heating up an indigenous extractive resource scramble in a remote part of Pakistan with unusual demographics. The Tharparker District or simply the Thar Desert located in the southeastern province of Sindh is under spot light because of a 175 billion tons of estimated coal reserves lying beneath its surface. These reserves have been known for around two decades, but only recently has development gained momentum to generate power in order to propel the country’s ailing economy. The signs of a resource boom are already animating the dull landscape of the region – roads, airports, site offices, power lines, guest houses and rising real estate price are evident. Near the town of Islamkot, an underground coal gassification pilot project represents the scale of possible change where workers sourced from local communities rest their heads after long-hour shifts.

Understanding the quandary faced by the residents of the Thar Desert took me to several villages situated in the vicinity of the coal fields to gather some basic ethnographic data on community perceptions of the project. Tharparker is home to around 1.5 million people stretching its boundaries with Indian Rajasthan and the Great Ran of Kutch salt marsh. The indigenous communities of Menghwar, Kolhi and Bheel make up a large part of the rural human settlement. The land is famous for rippling sand dunes, distinct folklore, rain-starved shrubs, drying wells, bottomed indicators of health, poverty and education and the most food insecure district in the country. One of the villages Mauakharaj of Tharparker, just beside an airport being built to host coal companies, has abject poverty and deprivation. The whole village is culturally and socially crippled because of fluorosis; a disease caused by consumption of excessive fluoride in groundwater, with no remedy and still people compelled to use it. --------------
The conversation did not lead to consensus on what approach should be dominant but there was a agreement that Thar coal development should not be a first resort but much further down the priority scale for addressing Pakistan’s energy crisis. As Pakistan’s election approaches, energy is a ballot issue and polemics are rife on panacea solutions. It is high time that Pakistanis consider their energy predicament with a multifaceted strategy that transcends petty nationalism so that communal harmony is not compromised for short-term and inefficient power solutions.

KARACHI: Karachi Electric Supply Company and Sindh Engro Coal Mining Company (SECMC) inked a memorandum of understanding to construct a power generation project capable of producing 600 megawatts (MW) at Thar coal field.
According to the agreement, SECMC – a joint-venture between Engro Powergen and the Government of Sindh – will develop a 600MW Mine Mouth Power Plant in Thar field’s block 2, whereas KESC will purchase power from the plant to meet the rising power demand in Karachi and adjoining areas of Sindh and Balochistan, according to a press statement on Wednesday.
Both the parties believe that the agreement will serve as the base for a mutually beneficial partnership for future progress and development of one of largest coal reserves of Pakistan.
The two companies acknowledged that coal from Thar had the potential to address the country’s severe power shortages and bring energy security which is indispensable for economic growth.
The Thar Coal Power Project aims to provide affordable and sustainable electricity to consumers using domestic resources. Reliance on indigenous fuel is likely to save billions of dollars in foreign exchange currently spent on import of the expensive alternative furnace oil, cutting the overall cost of power generation.
---------
After the signing ceremony, Sheikh said, “Thar coal is a project of national security as it will bring much-needed energy security to propel the nation into an era of prosperity and development. SECMC’s Thar block 2 alone can produce 5,000MW for the next 50 years, amounting to an estimated foreign exchange savings of $50 billion throughout the life of the project. This project will demonstrate maturity and capability of corporate sector to join hands and synergise on national level.”

Here's a GlobalPost report on coal conversion of gas-oil-fired power plants in Pakistan:

Pakistan has asked the Manila-based Asian Development Bank to help finance two coal-fired power units at the Jamshoro thermal power station in Sindh, a senior official of Pakistan's Water and Power Development Authority told Kyodo News this week.

Zafar Umar Farooqi, chief engineer at the authority, said Pakistan had initially sought a $433 million ADB loan for one 600-megawatt unit but the bank has now been asked to consider a loan for two units.

He said the size of ADB loan will be decided after consultations with the bank, but he indicated the total cost of Jamshoro project would be around $1.5 billion.

The government-owned WAPDA operates an 850-MW oil-gas fired thermal power plant at Jamshoro at less than 40 percent of its capacity because of a shortage of fuel oil and gas.

The ADB loan will be used to convert the existing plant to coal and set up an additional coal-fired plant at the site, increasing installed capacity at Jamshoro to 2,050 MW.

The government has already invited expressions of interest from consultants to oversee construction at Jamshoro, which is about 150 kilometers northeast of Karachi and uses water from the Indus River for cooling.

Pakistan has long examined setting up coal-fired power plants to use its own lignite coal, but efforts have been unsuccessful because of the high ash content in the coal.

Ismail Khan, senior external relations officer for the ADB for Pakistan, said the new units at Jamshoro would be designed to use mixed local and imported coal, most probably from Indonesia.

Farooqi said separate tenders will be invited for conversion of existing Jamshoro plant from oil-gas to coal.

Pakistan has an acute power shortage and the new government of Pakistan Muslim League (N) has given top priority to increasing power generation.

Pakistan has started verifying identities of over 135 million cell phone users through fingerprints. The massive exercise is being described by Washington Post as the "world’s largest — and fastest — efforts to collect biometric information". The deadline for completion is March 14, 2015.…